Wall Street is tense over the Fed's decision.
Midweek sees another meeting of the US Federal Reserve. Investors hope for a sign of an impending rate cut. Meanwhile, Tesla could benefit while another automaker goes into the red.
US markets closed barely changed at the start of the week. The Dow Jones Industrial Average of blue-chip stocks fell 0.1 percent to 40,539 points. The Nasdaq, which is tech-heavy, traded 0.1 percent higher at 17,370 points, after rising as much as one percent during the session. The S&P 500 last traded 0.1 percent higher at 5,463.
Investors are eagerly awaiting the US Federal Reserve's meeting midweek. Even though market participants expect the Fed to keep rates unchanged, experts anticipate that the central bank, led by Fed Chair Jerome Powell, will at least send a signal for an upcoming rate cut, which has been long-awaited by financial markets.
"Recent pullback from megacaps creates an opportunity to re-enter, particularly for companies with strong earnings growth prospects," noted UBS analysts. However, volatility may persist ahead of major companies' earnings reports. Tech giants Microsoft, Meta, Apple, and Amazon will provide insights into their books starting Tuesday. Alphabet and Tesla's earnings were previously not well-received by investors.
Ford Shares Fall Ahead of Fed Meeting
Ahead of the Fed meeting, yields on government bonds on both sides of the Atlantic fell. "The market is finally getting used to the fact that a cut in September is almost certain," said John Luke Tyner, analyst at Aptus Capital Advisors. The yield on ten-year US Treasuries fell 1.6 basis points to 4.184 percent.
Tesla shares rose nearly six percent following a positive analyst comment. Morgan Stanley analysts added Tesla to their "Top Pick" list for US autos and removed Ford. The analysts highlighted Tesla's plans for humanoid robots, which they see as larger and faster opportunities than autonomous vehicles. "Tesla is at the epicenter of this theme." Ford shares fell 1.6 percent.
McDonald's shares also gained significantly, despite the fast-food chain's surprise drop in sales for the first time in over three years. Investors were particularly pleased with the sale of $5 meals that exceeded expectations. McDonald's introduced the budget menu at the end of June as more customers with lower incomes avoided XXL meals and opted for cheaper food at home due to inflation. The stock rose nearly four percent. The shares have fallen around 15 percent this year.
You can read all the other market developments of the day here.
In the context of falling yields on government bonds and market anticipation of a rate cut, another automaker might face financial struggles, while Tesla, as mentioned, benefits from favorable analyst sentiment.
Following Morgan Stanley's positive comment, Tesla's shares saw a notable increase, contrasting the decline in Ford's shares post-analyst analysis.
